How do sell-on clauses work when players are transferred between clubs?

Pedro’s move to Chelsea saved his childhood club thanks to a sell-on clause

Chelsea welcomed Pedro to Stamford Bridge after completing his £21.4 million move from Barcelona, though the two parties involved in the deal weren’t the only ones to enjoy the benefits. Spanish fourth division side San Isidro are set to receive a small sum from the Blues after their former youth product’s departure to London, which will help the club with their bankruptcy issues.

The 28-year-old played for San Isidro before his move to the Barcelona youth side in 2004, allowing the club to receive £320,000 in compensation according to Article 21 of FIFA’s regulations on the status and transfer of players.

The article states that any club that has contributed to the education and training of a player is entitled to receive a proportion of the compensation paid to his former club, if he is transferred before the expiry of his contract. This contribution is known as a Solidarity Contribution, and it reflects the number of years he was registered with the relevant clubs.

FIFA have made these rules to allow smaller teams to benefit once their biggest prospects depart, so that they can reinvest the money back into the club to help with their progress to the upper tiers of their respective leagues.

What is a sell-on clause and how is the percentage calculated?

A sell-on clause, in general, is not illegal in any way as long as it is stipulated as an addition to the player’s contract. Many managers in the footballing world these days include such a clause into their most promising youngsters’ contracts so that they can ensure the club gets a piece of the fee earned from any subsequent transfer. This is done to take out a little sting from the transfer itself in case the player turns out to be phenomenal later in his career.

The amount of money to be given is decided by the percentage figure included in the player’s contract with his new club, which is based on the estimation of his current potential and his long-term one. The two clubs negotiating the deal have to decide on the figure and sometimes buying clubs offer selling clubs a bigger sell-on clause in exchange for a smaller transfer fee, so that they can save money in the short-term.

This move may backfire if the player becomes world-class and leaves for a team of a higher calibre, as most of the funds received during the transfer will go to the club selling him.

There have been a few instances where clubs have not included a sell-on clause before selling their player and have gone on to deeply regret it. Southampton were the club in the losing position during Gareth Bale’s world-record £86 million transfer from Tottenham Hotspur to Real Madrid, missing out on a potential sum of £20 million.

Southampton did not insert a sell-on clause when they sold Gareth Bale to Tottenham Hotspur

When the Saints sold the winger to Tottenham for £5 million in 2007, his contract included an addition of a 25% sell-on clause and £5 million in add-ons. They later decided to waive the sell-on clause in favour of £3 million from the London club due to financial constraints. This meant that they would not receive a single penny for any future transfers for the Welshman, who eventually went on to become an international football star.

The inclusion of such clauses in deals have many consequences and can be the deciding factor behind the making or breaking of a transfer at times. It could make clubs a lot of money, which would be beneficial for the club’s working and survival.

Other players who had sell-on clauses

There have been many famous stories involving the use of sell-on clauses over the years as the trend continues to steadily increase. Here are a few that have taken place over the past decade.

David Bentley

Arsenal’s youth academy produces some really talented prospects every year, but very few go on to become top players. David Bentley was an academy graduate who was seen by many as a potential first team player for the future, but he wasn’t consistent enough to keep his place in the Arsenal squad.

He moved to Blackburn Rovers in 2006 and established himself in the first-team during his two seasons at the club, following which he moved to Arsenal’s arch-rivals Tottenham Hotspur in 2008. The Gunners earned almost 50% of the the £15 million transfer fee after they had negotiated those terms with the Lancashire based club.

Cesc Fabregas

Cesc Fabregas was expected by many to rejoin Arsenal due to the presence of a buy-back clause in his contract, but the Gunners turned down the chance to sign their former captain from Barcelona. They did reap the financial benefits of the midfielder’s eventual move to Chelsea in the 2014/15 season, earning £5.6 million out of the £30 million that was required to prise him away from the Camp Nou.

This means that Arsenal had added a roughly 20% sell-on clause on Fabregas, who they had signed as a 16-year-old from Barcelona’s La Masia setup.

Arsenal inserted a sell-on clause before they sold Fabregas to Barcelona

Adam Lallana

Adam Lallana’s move to Liverpool pocketed his former club Bournemouth a cool £5.75 million due to the inclusion of a sell-on clause to his contract. The former Southampton midfielder joined the Saint’s academy in 2000 after playing for the Bournemouth academy till the age of 12, and played for 8 more years before his £25 million move to Anfield in the summer of 2014.

Angel Di Maria

Angel di Maria’s sale to Paris Saint Germain for a fee of £44 million was completely unexpected after he moved to the Old Trafford in the previous season for a fee that was £13 million more. His former club Real Madrid were not his youth club, but the La Liga giants still took home a little more than £5 million.

A sell-on clause was added to the Argentine winger’s contract during his move to Manchester United, which entitled Real Madrid to receive close to 15% of his subsequent transfer fee.

Nathaniel Clyne

Nathaniel Clyne moved to Liverpool from Southampton after a successful bid of £12.5 million pounds for the right-back. The deal has been reported to be inclusive of add ons worth £2 million, although Crystal Palace a lot benefitted from the move.

The London club had a 20% sell-on clause on their former defender which should see them make between £2 million to £3 million on the basis of the transfer fee. This sees the Saints only make £7 million to £9 million on a player they expected to receive a lot more for, although they will be pretty happy in general as the England international had a solid three years at the St Marys Stadium.

Raheem Sterling’s contract had a sell-on clause allowing QPR to pocket a tidy sum

Raheem Sterling

Raheem Sterling moved to Manchester City from Liverpool for a record £49 million, which is the highest transfer fee for an English player. The move earned his youth club Queens Park Rangers a minimum of £8 million, which is roughly 20% of his transfer fee.